Herzberger v. Standard Insurance Co., 205 F.3d 327 (7^th Cir. 2000)-In this consolidated appeal, Judge Posner clarified the issue of whether and how language in plan documents can confer discretion upon the administrator such that a reviewing court must ascribe more deference to the decision—in other words altering the review from plenary or "de novo" (finding a decision incorrect) to  "arbitrary and capricious" (finding a decision unreasonable).

Herzberger sought disability benefits for chronic fatigue syndrome (CFS).  The plan administrator determined that the plaintiff's real problem was a mental disorder, for which the plan limited benefits.  The plan document provided that the administrator "will pay the ... benefit upon receipt of satisfactory written proof that you have become disabled."  The district court granted summary judgment for the plan administrator after concluding that the language of the plan documents conferred discretionary judgment on the administrator. However, this court found that the language, standing alone, did not take the plan out of the default rule entitling the disappointed applicant to plenary review.

This court held that "the mere fact that a plan requires a determination of eligibility or entitlement by the administrator, or requires proof or satisfactory proof of the applicant's claim, or requires both a determination and proof (or satisfactory proof), does not give the employee adequate notice that the plan administrator is to make a judgment largely insulated from judicial review…." An ERISA plan can stipulate for deferential review, but the stipulation must be clear.  Apparently, discretion must be distinguished from ordinary decision-making:  "Obviously a plan will not—could not, consistent with its fiduciary obligation to the other participants—pay benefits without first making a determination that the applicant was entitled to them."

This court suggested the following "safe harbor" language for inclusion in ERISA plans: "Benefits under this plan will be paid only if the plan administrator decides in his discretion that the applicant is entitled to them." Cf. Bartlett v. Heibl, 128 F.3d 497, 501-02 (7^th Cir. 1997).  "An ERISA plan that contains such language will not be open to being characterized as entitling the applicant for benefits to plenary judicial review of a decision turning him down."